The majority of healthcare in the United States is sponsored by employers, because, unlike most of its European counterparts, the United States does not automatically provide healthcare services on a no-cost basis to all of its citizens. Generally, an employer selects and contracts with a third party administrator to administer its health benefits program funded either by the employer buying insurance or by self-funding the program (self-insurance).
Historically, employers sponsored “Traditional Indemnity” programs where employees and their dependents were free to choose and utilize the services of any healthcare service provider and be reimbursed for covered benefits, less some form of cost sharing such as an annual deductible or co-insurance. For example, a covered employee was responsible for the first $100 in annual covered benefits (“deductible”), for 20% of the next $5,000 (i.e., a $1,000 annual co-insurance limit), and was fully reimbursed for the amount that the year's claims exceed $5,000. Because the employee was paying only a minority of the cost of healthcare services, the employee was not sensitive to the cost and healthcare service providers rarely competed on the basis of price. However, healthcare service providers did compete based on other attributes such as technology, and the advent of expensive new technologies further drove costs upward and resulted in the cost of employers' healthcare programs spiraling sharply upward in the 1980s and early 1990s.
In response to the rapidly rising costs of their healthcare programs, employers have increasingly turned to Managed Care Organizations (“MCOs”) such as Health Maintenance Organizations (“HMOs”) and Preferred Provider Organizations (“PPOs”). MCOs develop restricted networks of healthcare service providers who are willing to accept a negotiated level of reimbursement which is typically much lower than the providers standard fees. Because the employer (and not the employee/dependent) is the customer of the MCO, the employee/dependent has virtually no voice in the selection of the MCO's provider network. Employees who go outside the MCO's provider network typically receive no benefits from traditional HMOs and typically receive dramatically reduced benefits from PPOs or “Point of Service” HMO programs.
MCOs have also implemented extensive programs designed to further manage the cost of healthcare. Most of these Utilization Management (“UM”) programs are designed to reduce utilization and restrict the delivery of care. Examples of UM programs include precertification programs which require prior authorization from the MCO before a physician can refer a patient to another physician, order a procedure or test or admit a patient to a hospital. Some MCO programs require that a Primary Care Physician (“PCP”) be selected by each covered member, and that the PCP must act as a “gatekeeper” to authorize referrals to other physicians.
MCOs also rely heavily on the collection of utilization and claim information in order to administer their programs and to manage the risk associated with healthcare costs. MCOs utilize a variety of methodologies to manage the risk, including both risk sharing and risk transfer to healthcare service providers. Some of the MCO risk sharing and risk transfer methodologies have become quite controversial and have therefore become subject to increased scrutiny, e.g., placing a physician at risk for the cost of his referrals of patients to specialists or hospitals.
In light of the above, it is not surprising that MCO's chosen by and designed for employers are generally ill-favored by both employees and healthcare service providers. Unfortunately, the reality is that healthcare coverage is a business-to-business product in the United States, and not a consumer product. Employee dissatisfaction generally stems from the following shortcomings of the MCO programs: (1) the limited provider network may not include-their desired physician or hospital; (2) the administrative and utilization management requirements of the program are often burdensome and frustrating; and (3) the benefit design chosen by the employer often does not meet the particular needs of the employee.
Physicians, hospitals and other healthcare service providers are generally discontent with MCOs because: (1) the administrative costs and paperwork are unduly burdensome; (2) the UM programs imposed by MCOs are both administratively cumbersome and expensive; and (3) the provider contracts offered by MCOs allows the MCO to unilaterally dictate the price, terms, and administrative requirements; and (4) the profits and administrative fees charged by MCOs is believed to be at the expense of patient care.
Ideally, healthcare service providers should be able to contract more directly with patients and employers, thereby reducing the role of intermediaries such as MCOs. Furthermore, employees and their families should be able to be “consumers” and make their healthcare purchasing decisions. Finally, employers should be afforded relief from both unpredictable and rising increases in their costs of sponsoring healthcare programs for their employees.
Accordingly, a need exists for a healthcare coverage system and method that allows individuals to contract for the healthcare services that they need, from the healthcare providers that they prefer, and at a price that is within their financial restraints. In other words, to empower the individual as a consumer. There further exists a need to implement Web sites on the Internet to reduce the administration costs of implementing such a healthcare coverage system and to facilitate the registration of individual members into the system. Finally, there exists the need to provide a mechanism that allows healthcare service providers to offer their services to consumers who seek to build a customized healthcare services package, while providing the healthcare service providers stable and predictable fixed monthly incomes and manageable patient lists.